Gov't Struggling to keep Banks in Private Hands

Discussion in 'Political Zone' started by ABQCOWBOY, Feb 23, 2009.


    ABQCOWBOY Moderator Staff Member

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    Regulators Pledge to Shore Up Banks, But Keep Them in 'Private Hands'
    Federal regulators are planning to launch a revamped program to inject capital into financial institutions on Wednesday.
    Monday, February 23, 2009

    Federal regulators are planning to launch a revamped program to inject capital into financial institutions on Wednesday, but insisted that U.S. banks should stay "in private hands" amid growing talk of nationalization.

    "Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands," the Treasury Department, Federal Deposit Insurance Corp. and other agencies said in a joint statement issued Monday.

    The White House last week downplayed persistent speculation -- fueled by comments by Democratic Sen. Chuck Schumer, N.Y., and Chris Dodd, Conn. -- that some banks could be effectively nationalized by the federal government.

    The Wall Street Journal reported Monday that Citigroup Inc. is talking with federal officials about possibly expanding government ownership, discussions that could end with the government holding up to 40 percent of the company's common stock.

    The joint statement Monday said government assistance is aimed at giving banks "temporary" capital relief.

    "The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," the statement said. "Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments."

    The statement did not name any specific banks or respond to the reports about Citigroup.

    The revamped program was announced by Treasury Secretary Timothy Geithner earlier this month, to plow federal money into banks in return for giving the government ownership stakes. Regulators provided some details on that program Monday.

    "Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory," the regulators said.

    Later Monday, Geithner will join President Barack Obama and other guests at a fiscal responsibility summit at the White House to discuss how to curb a burgeoning federal deficit laden with Social Security, Medicare and Medicaid obligations.

    The Associated Press contributed to this report.
  2. JBond

    JBond Well-Known Member

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    It's is going to be a struggle to keep anything in private hands by the time Obama is done with his reign of fiscal terror.

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